AI Music, Bots and the First Federal Streaming Fraud Case
Artificial intelligence can write a pop song in seconds. Software can play that song over and over without anyone listening. Put those two things together with royalty payments, and federal prosecutors say you have wire fraud. Prosecutors described it as the first federal case of its kind, and it previews the AI streaming fraud prosecutions likely to follow.
At the time of this writing, according to WUNC, via BPR, a man from Cornelius, North Carolina, was sentenced on October 6 in Manhattan federal court to 18 months in prison in what prosecutors called the first federal criminal case of music streaming fraud. He had pleaded guilty to conspiracy to commit wire fraud. Prosecutors said that over several years he used AI to generate hundreds of thousands of songs, then used thousands of fake streaming accounts and automated “bots” to stream them billions of times, collecting more than $8 million in royalties.
He was also ordered to pay back roughly that amount.
The case is over, but the questions it raises about AI streaming fraud are just beginning.
How Prosecutors Described the Scheme
According to the reporting, prosecutors alleged that the scheme had three parts:
- AI-generated music. Rather than writing songs, he allegedly worked with an AI music company to produce a massive catalog.
- Fake accounts. Thousands of streaming accounts were allegedly created under false names, paid for with debit cards obtained under false pretenses.
- Automation. Bots allegedly streamed the songs, and the plays were spread across thousands of tracks to avoid the platforms’ fraud detection.
The original indictment also included wire fraud and money laundering charges. Under the plea agreement, he pleaded guilty only to the conspiracy count.
The Federal Laws Involved
AI streaming fraud cases like this one generally rely on long-standing federal fraud statutes:
- Wire fraud is generally addressed under 18 U.S.C. § 1343, which covers schemes to obtain money by false pretenses using interstate wires, which includes the internet.
- Conspiracy to commit wire fraud is generally addressed under 18 U.S.C. § 1349, which covers attempts and conspiracies to commit federal fraud offenses.
- Money laundering is generally addressed under 18 U.S.C. § 1956, and it is often charged when proceeds of an alleged fraud are moved or spent.
None of these laws mention artificial intelligence. They don’t need to. Prosecutors are applying old statutes to new technology, which is exactly the pattern Attorney Ron Frey saw in the early internet cases.
Where Does AI Streaming Fraud Begin?
Using AI to create music is not, by itself, generally a crime. But AI-generated music can still raise legal problems, such as copyright infringement or violations of other laws, depending on how it was made and used. The government’s theory in this case was about deception: fake listeners, fake accounts, and false information used to collect money that would otherwise go to others.
That raises fair questions about where AI streaming fraud begins for anyone working in this space:
- When does heavy promotion become fraud?
- Is using automation to boost plays a breach of a platform’s terms, a civil dispute, or a federal crime?
- Who is responsible when an AI tool, a promotion service, or a contractor creates the fake activity?
- How do investigators prove which streams were fake?
The answers often turn on intent and on what the person knew. Those are the issues a defense lawyer focuses on.
Financial Records Tell the Story
Fraud cases like this are built on data: platform logs, payment records, bank transfers, emails, and messages. Attorney Ron Frey earned a Bachelor of Science in Business Administration, with a major in finance, and a Bachelor of Science in Economics from John Carroll University. That background is useful when a case comes down to following the money and testing how the government reads financial records. (More about his background is on his attorney profile.)
Our financial crimes page and our page on AI fraud and voice cloning cover related charges.
A North Carolina Case With National Reach
The defendant lived in North Carolina, but the case was prosecuted in New York. That is common in internet fraud cases, where the platforms, payments, and victims can be spread across the country. (See our North Carolina internet crime page.)
Federal fraud investigations often begin quietly, with subpoenas to platforms and banks, and the first notice a person gets may be a target letter or a visit from agents. (See Received a Federal Target Letter in an Internet Crime Investigation.) When agents reach out, Attorney Ron Frey generally advises exercising the right to remain silent and contacting an attorney before making any statements.
“The statutes are old, but the technology is new. In these cases, the question is often what the person actually knew and intended.”
As always, laws are subject to change and revision, so contact Attorney Ron Frey to discuss the details of your case and the current status of the law.
Questions About an AI or Online Fraud Investigation? Let’s Talk.
If you would like to speak with an experienced criminal defense lawyer about a streaming, AI, or online fraud investigation, or you have further questions, don’t hesitate to contact Attorney Ron Frey of The Frey Law Firm, LLC, wherever you are. Your consultation is free and confidential. You can talk with us by phone, by video, or at our Tampa office, and when the situation calls for it, we can come to you.
Call or text (844) 766-3739. Rapid response, 24/7.
This post is for general information only. It is not legal advice, and reading it or contacting us does not create an attorney-client relationship.
Laws on online fraud and artificial intelligence are changing quickly and vary from state to state, and how they apply depends on the facts of each case and on how courts interpret them. Please don’t rely on this post, or on any other information online, to make decisions about your situation. Talk with a lawyer.